What Would It Take In Units And Margins To Have Apple Trade At $240 [View article]
Chuck: Nice work. I did not check you math, but looking at the margins implied my my ROIC makes sense.
And yes, those margins will have to fall a long way for my prediction to be accurate.
And yes, I think that will happen.
The current stock price already implies NOPAT margins will drop from 27% today to about 13%. My price target range implies margins may go below 4-5%.
And yes, I think that will happen. Not tomorrow, not next month. But sooner than most people think. It's the law of competition that drives my thinking.
"I don't care how much you like your iPhone, or whether you think that Google's (GOOG) Android is in its death throes - Apple (AAPL) is coming under some very serious fire from the Android camp, with the charge led by Korea's seemingly unstoppable Samsung (SSNLF.PK). The market share and sales data are in... it seems that my conclusion (in last article), which was met with harsh criticism, was spot on:
'Margins will likely continue to compress, ASPs are likely to come down, and market share will almost certainly continue to erode.'
Just a matter of time. Once the market starts to take this reality into account, the stock will fall like a rock.
I am not the only one with this idea. Some very smart people beat me to the punch, like Bruce Greenwald at Columbia University. Here is an interview in which he says Apple's profits will "disappear": http://bit.ly/18OajM2
Here's an excerpt: "I don't care how much you like your iPhone, or whether you think that Google's (GOOG) Android is in its death throes - Apple (AAPL) is coming under some very serious fire from the Android camp, with the charge led by Korea's seemingly unstoppable Samsung (SSNLF.PK). The market share and sales data are in... it seems that my conclusion (in last article), which was met with harsh criticism, was spot on:
Margins will likely continue to compress, ASPs are likely to come down, and market share will almost certainly continue to erode.
If you see my comment on that article, you'll see that the $10.8 billion is not my NOPAT for 2012, that's just what I plugged into my model to get a perpetuity valuation of AAPL with that level of ROIC.
My NOPAT for 2012 for AAPL is actually $41.7 billion. Apple is a very profitable company right now. I just don't think that level of profitability is sustainable.
Danger Zone For This Week: Amazon.com [View article]
Michael428, The economic book value of AMZN, ie the no-growth value of the business, is $17/share. So any price target above that implies some profit growth.
My main point is that the $267/share stock price implies LOTS of growth - like becoming the size of Wal-Mart growth, which for all the reasons stated above, I believe highly unlikely.
This link will download my DCF model showing the scenario where AMZN gets to Wal-Mart level margins over within the next several years while also growing rapidly. All data and calcs are available in my model. http://bit.ly/Z3nc0B
Danger Zone For This Week: Amazon.com [View article]
Michael428, I think the stock could fall a long way. I am not into price targets and do not use P/E multiples. I prefer to quantify expectations and, then, decide on whether I think those expectations are materially high or low.
Danger Zone For This Week: Amazon.com [View article]
I don't like to talk about specific target prices (and I don't put much stock in reported earnings), as I think they imply a greater specificity than we can really know. All I'll say is that AMZN should be priced for some growth, just a great deal less than what is currently baked into the stock price.
Danger Zone For This Week: Amazon.com [View article]
Michael428:
85% drop is probably slightly on the pessimistic side as AMZN should still grow volume and revenues at these thin margins. However, I don't see them growing nearly enough to justify its present value.
Danger Zone 4/23/2013: Sears Holdings [View article]
What Would It Take In Units And Margins To Have Apple Trade At $240 [View article]
ROIC is a lot more than your simple equation - if you are to do it right.
ROIC definition: http://bit.ly/10H2120
More importantly, the definition of economic earnings:
http://bit.ly/xzRJkn
Why I'm Bullish And We Are Not In A Bubble [View article]
Good points. I agree there are headwinds.
And there have always been headwinds. And they undermine our potential - for sure.
Why I'm Bullish And We Are Not In A Bubble [View article]
Good points. I agree there are headwinds.
And there have always been headwinds. And they undermine our potential - for sure.
What Would It Take In Units And Margins To Have Apple Trade At $240 [View article]
Nice work.
I did not check you math, but looking at the margins implied my my ROIC makes sense.
And yes, those margins will have to fall a long way for my prediction to be accurate.
And yes, I think that will happen.
The current stock price already implies NOPAT margins will drop from 27% today to about 13%. My price target range implies margins may go below 4-5%.
And yes, I think that will happen. Not tomorrow, not next month. But sooner than most people think. It's the law of competition that drives my thinking.
Here's a nice article on the competition that Apple currently faces.
http://seekingalpha.co...
"I don't care how much you like your iPhone, or whether you think that Google's (GOOG) Android is in its death throes - Apple (AAPL) is coming under some very serious fire from the Android camp, with the charge led by Korea's seemingly unstoppable Samsung (SSNLF.PK). The market share and sales data are in... it seems that my conclusion (in last article), which was met with harsh criticism, was spot on:
'Margins will likely continue to compress, ASPs are likely to come down, and market share will almost certainly continue to erode.'
Just a matter of time. Once the market starts to take this reality into account, the stock will fall like a rock.
I am not the only one with this idea. Some very smart people beat me to the punch, like Bruce Greenwald at Columbia University. Here is an interview in which he says Apple's profits will "disappear":
http://bit.ly/18OajM2
The Truth Behind Apple's Numbers [View article]
http://seekingalpha.co...
Here's an excerpt:
"I don't care how much you like your iPhone, or whether you think that Google's (GOOG) Android is in its death throes - Apple (AAPL) is coming under some very serious fire from the Android camp, with the charge led by Korea's seemingly unstoppable Samsung (SSNLF.PK). The market share and sales data are in... it seems that my conclusion (in last article), which was met with harsh criticism, was spot on:
Margins will likely continue to compress, ASPs are likely to come down, and market share will almost certainly continue to erode.
The Truth Behind Apple's Numbers [View article]
The Truth Behind Apple's Numbers [View article]
If you see my comment on that article, you'll see that the $10.8 billion is not my NOPAT for 2012, that's just what I plugged into my model to get a perpetuity valuation of AAPL with that level of ROIC.
My NOPAT for 2012 for AAPL is actually $41.7 billion. Apple is a very profitable company right now. I just don't think that level of profitability is sustainable.
Danger Zone For This Week: Amazon.com [View article]
The economic book value of AMZN, ie the no-growth value of the business, is $17/share. So any price target above that implies some profit growth.
My main point is that the $267/share stock price implies LOTS of growth - like becoming the size of Wal-Mart growth, which for all the reasons stated above, I believe highly unlikely.
This link will download my DCF model showing the scenario where AMZN gets to Wal-Mart level margins over within the next several years while also growing rapidly. All data and calcs are available in my model.
http://bit.ly/Z3nc0B
Danger Zone For This Week: Apple [View article]
http://seekingalpha.co...
Apple, Android, And The Future Of The Smartphone [View article]
Competition is fierce and will force margins to low levels, far below what the AAPL and Samsung's enjoy today.
I think you would enjoy my article on the defensibility (or lack thereof) of AAPL margins.
http://seekingalpha.co...
Danger Zone For This Week: Amazon.com [View article]
Danger Zone For This Week: Amazon.com [View article]
I think the stock could fall a long way. I am not into price targets and do not use P/E multiples. I prefer to quantify expectations and, then, decide on whether I think those expectations are materially high or low.
Danger Zone For This Week: Amazon.com [View article]
Danger Zone For This Week: Amazon.com [View article]
85% drop is probably slightly on the pessimistic side as AMZN should still grow volume and revenues at these thin margins. However, I don't see them growing nearly enough to justify its present value.